The latest data from the National Bureau of Statistics show that in May, among the 70 large and medium-sized cities, housing prices rose year-on-year in all but Wenzhou, with 69 cities posting gains. Shanghai, despite strict purchase restrictions, rose 11.7%, the highest in the country. On a month-on-month basis, in May, housing prices fell in 35 cities including Shanghai, Hangzhou and Shenzhen, remained flat in 20 cities including Guangzhou, and continued to rise in 15 cities including Beijing. Analysis by Mysteel (Shanghai Ganglian) suggests that under current circumstances, the real estate market will continue to decline in the short term, with indicators such as floor space sold and floor space under construction still trending lower, thereby affecting steel demand. However, driven by factors such as railway investment and shantytown redevelopment, steel prices are expected to stop falling and stabilize.

All major real estate market indicators decline

Commercial housing inventories in major cities across the country have hit a new record high, with first-tier cities showing the most pronounced increase. As of the end of May, total new commercial housing inventory in 35 cities, including the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, stood at 255.7 million square meters, up 2.7% month-on-month and 20.1% year-on-year. Inventories have once again hit a record high, with first-tier cities showing a stronger increase than second- and third-tier cities. Even as developers increased project launches, market transactions in May did not rebound significantly as expected, dashing developers' hopes of a strong May sales push, and bearish market sentiment intensified.

The latest data from the National Bureau of Statistics show that from January to May, major indicators such as housing sales and new construction were all in decline.

The real estate development climate index has turned downward again, sliding back toward a lower prosperity range. Data show that the national real estate climate index in May was 95.02, down 0.77 points from the previous month. As one of the key drivers of economic development, the real estate industry directly affects nearly 40 industries. For nearly 15 years, the real estate industry has been booming, but statistics bureau data show that real estate investment growth has declined for four consecutive months. In particular, the number of major cities with month-on-month housing price declines surged eightfold in May, indicating that the real estate market is slowing at an accelerating pace.

Rebar price decline slows

Multiple real estate indicators such as new housing construction, floor space under construction and floor space sold are closely related to steel prices, especially rebar prices. Among them, floor space under construction has the greatest correlation with rebar prices, while housing sales and new construction have a certain leading effect.

Recent data show that rebar prices are lingering at the bottom for an extended period, although the year-on-year decline has narrowed noticeably over the past two months. With the recovery in May of new housing construction area and land acquisition area by real estate developers, floor space under construction is expected to pick up later, which would help drive rebar prices upward.

Steel prices to remain range-bound in the short term

Looking at data from recent months, after nearly two years of sustained increases, domestic real estate prices have entered a correction phase, with new construction activity, land acquisition and housing sales mired in weakness, bringing downward pressure on the economy. Although HSBC's June manufacturing PMI and May electricity generation data showed improvement, fixed asset investment remains clearly divergent, with infrastructure investment driven mainly by government spending rising sharply to offset the sharp decline in real estate and manufacturing investment. In this regard, hidden concerns remain for domestic economic growth, as the pressure on the economy from a weakening real estate market is clearly evident.

Real estate investment growth fell significantly in May, approaching lows not seen since the subprime crisis. Given that the real estate industry is closely linked to many upstream and downstream industries, the continued deterioration of property sales and investment data—especially the combination of strengthening expectations of falling home prices and a weakening real economy—poses significant pressure on stabilizing growth. In light of this, real estate policy may continue to be relaxed in the future. In concrete terms, increasing credit support for first-home purchases, supporting affordable housing construction through targeted easing, relaxing purchase restrictions in some cities, and adopting differentiated mortgage policies to stabilize the commercial housing market have become realistic choices for local governments.

In response to frequent price cuts in local housing markets that have prompted local governments to relax real estate control policies, the competent authorities have neither issued explicit documents nor cracked down on such moves. From various signs, under the current economic situation, to ensure that GDP growth reaches at least 7.5%, mini-stimulus policies will be significantly stepped up.

Dragged down by the real estate market, the building materials market is operating weakly. However, with the accelerated progress of affordable housing and shantytown redevelopment, faster infrastructure investment in railways and water conservancy, and a moderating decline in the real estate market, the steel industry is still expected to improve in the future. Steel mill inventories remain high and average daily crude steel output has rebounded, but social steel inventories continue to decline, and the domestic economy is gradually showing signs of stabilizing and improving. Considering the hot and rainy summer weather and the accelerated decline in iron ore prices stimulating steel mill production, steel prices are expected to remain range-bound in the short term, with a rebound possibly delayed, while sluggish economic growth will limit the extent of any steel price rebound.